Just how bad is FATCA? Financial imperialism at work

We all know how inefficient government is. After all, government paper shuffling is what people with no ambition or dreams go into.

Somehow, though, the government is amazingly efficient when it comes to what you owe them. Don’t pay up and the IRS will be all over you. If you’re still delusional enough to be doing business in California, the Franchise Tax Board might send the mob after you.

This weekend, I spoke with James Jatras again about the Foreign Account Tax Compliance Act – FATCA – and just how bad of a message it sends from the United States.

Signed by Barack Obama in 2010, FATCA is a bureaucrat’s wet dream.

Plenty of countries find the American government rather arrogant to begin with.

But in addition to being amazingly arrogant (more on that in a moment), FATCA is also a great example of how the government plays dumb when it suits them. Despite its efficiencies in extracting money from you, the government now claims it requires offshore bank account holders to fill out forms in triplicate to report their sins.

What sins, you ask? Why, having an offshore bank account. US citizens already have other obligations, including a form called FBAR, for their annual report to Uncle Sam. If you have $10,000 or more in a bank account overseas, you must file this form. It’s not like the Treasury doesn’t know what’s up.

But Big Government loves to make its serfs jump through hoops.

For those not familiar with FATCA, the milk cows aren’t the only ones targeted. The US government has decided in its infinite wisdom to force every sovereign government and every foreign bank to be unpaid tattletales to the IRS.

Just in case you risk fines that could easily swallow your entire offshore bank account, FATCA makes sure you seek atonement by demanding that said offshore bank phones home to Big Government. It outlaws bank secrecy – at least when dealing with US clients – in every country on earth.

FATCA forces banks and other financial institutions overseas to break their own country’s laws. While bank secrecy has been on the decline, some countries like Austria have been fighting for their right to keep it. Thanks to FATCA, as well as new laws in the EU, bank secrecy is dead.

And to think the average member of the “99%” is going around complaining about “the rich” and their numbered Swiss bank accounts. Those days are so long gone, it’s not even funny.

Leave it to the Land of the Free to tell other countries that their laws don’t matter.

Just when you thought the United States might be taking a break from bombing other countries and starting costly wars, they’re re-packaging their imperialism to take on a financial shade.

How do you think the US government would take to China or Russia demanding American banks spend billions of their own dollars to report on their respective citizens banking in the United States?

“How dare they?!”, I imagine.

But as well all know, the United States is the biggest and best-est country in the whole world and deserves special considerations. It allegedly did something super extra special a long time ago to make “America” better than everyone else.

Now, that financial imperialism and arrogance is shutting down bank secrecy around the globe. Americans have no right to privacy in banking anymore.

A quick read of FATCA will show you just how poorly written and ambiguous it is. I imagine that was done on purpose.

Just like Obamacare, FATCA will allow bureaucrats to interpret it however they wish and issue endless directives that eat away sovereignty and economic freedom bit by bit. Politicians won’t be happy until they kill off the entire offshore banking system and bring your money back where they can tax, seize, and confiscate it for any purpose they deem necessary.

Leave it to the United States government to create a bureaucratic nightmare so unfathomable that its wake effects every financial institution on earth.

Under FATCA, US banks will be required to withhold 30% of payments sent to banks that don’t participate. Foreign banks will be required to do the same, even amongst transactions outside of the United States. Banks must figure out which of their millions of transactions a day might involve a US citizen, a US bank, or a bank outside of the US that isn’t FATCA-compliant.

The main reason for FATCA is fear. The more the government can scare foreign banks, the less likely they’ll be to take American clients. It’s a capital control. Fortunately, my travels have shown that in many of the best places to bank, Americans are still welcome. But who knows for how long?

Once you get it through your head that government uses fear to control you in almost everything they do, you’ll be able to live your life working around their propaganda. Unfortunately, FATCA goes beyond typical government scare tactics and into the area that used to cause nations to call up the armies.

On our radio interview, James said that he is hopeful that Congress will be voting on the repeal of this monstrosity. I have my doubts, but we can only hope.

After all, economic freedom is going to zero with a bullet anyway.

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5 Comments

Deckard1138
on April 29, 2013 at 10:52 pm

Let us not forget that the biggest lie at the heart of FATCA is this shiny, technicolor dream of “reciprocity” that is intended to entice foreign governments into signing FAUST FATCA deals with the US. Of course the US has absolutely no intention of honoring any kind of reciprocity deal and any nation that thinks otherwise is truly just kidding itself.

For a country who’s entire creation myth (No taxation without representation) has now been proven, by its shoddy treatment of its expats to be just that – a myth – the lies perpetrated by FATCA are just simply breathtaking in their audacity. Foreign governments are prostrating themselves before a dying god that hardly deserves the pathetic attention. I do believe we are witnessing a kind of mass hysteria amongst nation-states and this may indeed be the harbinger of much darker days to come.

Nomad Capitalist
on April 29, 2013 at 11:18 pm

Excellent comments. Sadly, you are right; the US government is the self-absorbed friend that asks about your day only as an excuse to talk about themselves. And they don’t care about other countries or helping them solve their own problems. The myth of American exceptionalism has made them rather narcissistic in this regard.

As time goes on, though, I believe, the world will begin to see – as I think they already have in some ways – that the United States is a paper tiger propped up by its own propaganda. The world is emerging too quickly for it to be a false idol to the rest of the world forever. China and Russia have already started to put their foot down. Others will follow.

Deckard1138
on April 30, 2013 at 12:20 am

Ironic, isn’t it, that two of America’s greatest adversaries of the last century may yet offer an antidote to this unfolding, Orwellian nightmare? If only the rest of the world had the foresight and resolve of the leading BRICS nations.

Only when the US dollar finally tumbles from its reserve currency mantle shall the dangerous fantasy of American exceptionalism finally yield to the cold light of reality. For the sake of the entire world it can’t happen a moment too soon.

The only upside to this is it hastens the quest for alternative financial networks that don’t go through the US choke-point. Not that a Chinese or Russian network could be trusted any better, they would at least provide alternatives. I think this is why so many people are gravitating to Bitcoin, it just keeps governments out of their business.

bubblebustin
on April 30, 2013 at 7:51 am

The lawsuit launched against the IRS and Treasury by the Florida and Texas Banker’s Associations attacks the reciprocity element of the IGA’s. I asked Jim Jatras his opinion at Isaac Brock Society:

“I think the suit is a very positive development of course. I am trying to get a read on the likelihood of success on the merits, but on my first read of the complaint ( http://www.repealfatca.com/downloads/FIBA_and_TX_complaint_.304.pdf ), it seems plausible. While it doesn’t go to the heart of FATCA — and in fact they deliberately, it seems, went out of their way not even to mention FATCA — it’s a good shot at the one thing Treasury claims it can offer countries in the form of “reciprocity” under Article 2(b) of the Model 1 IGA. If they can’t even deliver on that, much less the additional authority they’ve asked Congress for under Article 6(1), “reciprocity” is a dead letter. Then the ball’s in the court of foreign capitals to either stand up for themselves or capitulate without even a pretense that this is an even deal. I expect it will be a mixed bag, which itself would be a disaster for FATCA.”

It’s ironic that FATCA itself has become the F-word for those fighting reciprocity, but their success is one of the most powerful ways of derailing FATCA. That is not unless foreign governments are willing to proceed anyway, as they seem happy to do with only the promise of reciprocity.

Lately my mind has gone to the long term effects of FATCA. When the citizenship based taxation cat is finally let out of the bag, what effect will this have on US global migration and what effect will FATCA’s destructiveness have on US families already living abroad? People can respond in many ways when they feel their freedom is being restricted, or worse, when they feel under siege.